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Party's over for SGOs in Cyprus

26 February, 2014

 * €1.4 bln privatisation bill heads for House - EAC unions continue strikes *

Parliament will debate the landmark privatisation bill at its full plenary session on Thursday, where it is expected to pass with a thin majority of the ruling Democratic Rally (DISY) and the smaller Democratic Party (DIKO) votes, as workers from the electricity utility continue their strikes for a third day, causing chaos to the economy and society.
Wednesday’s strike by all workers at the Electricity Authority of Cyprus will be across all its services, with only a core emergency team in place, essentially violating the law the bans strikes in essential services that could jeopardise the nation’s security.
During the EAC strikes on Monday and Tuesday, energy regulator RAEK took control of the EAC’s output despite power cuts, and reinstated full supply to the entire distribution network on Tuesday thanks to the contribution of solar parks and wind farms.
If passed, the bill will pave the way for the three main semi-government organisations – telco Cyta, power generator EAC and the Ports Authority – to head for partial or full sale, making them leaner, productive and profitable, and in the meantime raising some 1.4 bln euros for the state over the next four years.
It will also allow the Eurogroup of Eurozone finance ministers to rubber-stamp at their next meeting on March 10 the next tranche of international aid of 150 mln euros, in addition to the 85 mln Cyprus should receive from the IMF.
According to the Memorandum of Understanding agreed with the Troika of international lenders, the government must raise 1 bln euros by the end of 2016 and 400 mln by the end of 2018, as part of a package of reforms ad a 10 bln euro bailout.
But trade unions at the three main SGOs have argued that they could raise the money from other sources, but have failed to come up with concrete proposals. Fearing they will lose privileged perks and generous wages, staff from the Electricity Authority of Cyprus staged a protest on Monday that turned violent, with several injured, when they cut the power at the House of Representatives where the issue was being debated at the House Finance Committee. Workers at Cyta staged a walk-out, following strikes a week earlier, while strikes at the ports last week caused valuable cargos and commercial ships to be turned away or remain anchored at Limassol and Larnaca.
Other SGOs headed for privatisation include the Cyprus Stock Exchange (CSE) and the Cyprus International Fairs Authority (CIF), as well as the sale of the government’s stake in Cyprus Forest Industries Ltd. and the Pancyprian Bakeries Ltd., in which the state holds a mere 10.6% stake.
Finance Minister Haris Georgiades warned on Monday that failure to pass the privatisation bill would rejecting the 235 mln euros from the Troika and even prompting a new MoU with harsher austerity measures.
Fearing the bill would not pass through parliament on the DISY votes alone, Georgiades allowed for minor alterations to secure the votes of DIKO, despite the latter deciding to pull out of the coalition next week, that basically allow for the House and employees to have a greater say in the privatisation process.
The changes refer mainly to the stages of the privatisation process that will include parliamentary and employee involvement and exchange of information through a “mixed intermediary committee”. Other provisions include national security, establishing a monopolies control mechanism where competition is not available.
Pavlos Liasides, a spokesman for the association of private power generators (SEEAAEK) said the EAC strikes “were in the least provocative”.
“We have been struggling for years for the electricity market to finally open up and to allow the Cypriot consumer to have a choice and at lower rates,” he said.
Employer and business organisations OEV and KEVE condemned the strikes and Monday’s violence, echoed in a statement issued on Tuesday by the EAC management.
On the other hand, the Cyprus Investment Promotion Agency (CIPA), the body in charge of attracting foreign direct investments, said “the interruption of electricity supply, port services, as well as other essential services, as a result of strikes blight the efforts our country is making on various levels, to regain its credibility and restore its image as an attractive investment destination.”
All organisations and bodies recognised workers’ rights to strike, but unanimously condemned the trade unions’ bullying tactics and taking control of the utilities, such as the power stations and distribution network.
Workers at the Ports Authority agreed on Tuesday, after a meeting with Transport Minister Tasos Mitsopoulos, to stand down from their decisions to strike and enter into a dialogue with the administration.
Meanwhile, of the SGOs headed for privatisation, in accordance with a framework plan proposed by the audit and advisory firm PwC in cooperation with the Republic’s Legal Services, Cyta is at the top of the list with the need for a “strategic investor” by the end of 2015. The Ports Authority will remain in the public domain, but will contract out the management and services at Limassol and Larnaca, while EAC will need an investor by the end of 2017 or early 2018.
The Fairs Authority is also a major land-owner, with the vast estate in Engomi earmarked in the past for new government facilities and buildings, making it attractive as a real estate deal.
The Forest Industries management claims that it is more profitable than at present, which is why it should not be included in the privatisation plan, the CSE Council wants to adopt a similar model with other bourses around the world and the Pancyprian Bakers suggested that priority be given to existing shareholders for the 10.6% stake the government owns.
Both business organisations, KEVE and OEV, said they favoured the privatisation plan in its entirety as it would boost the economy and attract new investors.
DIKO party leaders Nicolas Papadopoulos said his party will take a final decision during Thursday’s plenary session, while the communist Akel, socialist Edek and the single Greens and Citizens Alliance MPs said they would vote against the bill.